| Help! 401k giving us a hard time about withdrawal. |
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BuffieJo
First Time Poster
Cash: $ 0.50
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Joined: 15 Feb 2006
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| Help! 401k giving us a hard time about withdrawal. |
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Here is the problem. My dear husband and I bought this house we live in 13 yrs ago. We took out a 15 yr mortgage. This past June 2005, we refinanced the house for 40K, so we could remodel and build a garage. When all was said and done we had 32K for the remodel (after attorney fees, closing fees, and finishing paying off the mortgage). Anyways, we weren't expecting to have to do the roof and we only took out 40k because dh was informed that the machines in his dept at work would be being sent to china, and he will be losing his job he has had for 14 yrs. Not that they will tell him when. And we knew we couldn't afford to have a payment over $300 a month.
Anyways, the roof in leaking. So we called our 401k to take a hardship withdrawal for 5k to get drainage dug (water problem with the new garage), and the roof fixed. Told them that dh will be losing his job of 14 yrs. 401k has 55k in it. We are a one income family and have been for 13 yrs.. DH (42) and I (32) know that this is supposed to be for the future, however, we can't retire on 55k. I am going to be going to school this year, and when I graduate in two years will be making more than he is now. We really can't afford to take any other loans, because we need to make it through the next two years. Dh will be making less when he loses his job. We pay off out C.C's monthly, no car payments. We have excellent credit, but we can't have the extra payment for a loan when dh loses his job, and with me in school full-time.
Called 401k to take hardship withdrawl for 5k. The said they would send us the application, and to write down reason as facts & circumstances, and it had an expiration date of three weeks. We were told to write a note as to what we wanted the money for. We did that, and they sent it back to us saying "Need more supporting documentation". It took over a week to get it back.
So I typed up the estimate and printed it off. It had all the materials, and cost of labor, and delivery charges on it. We called on the 1st and were told that it was denied and that we need have more official documentation. We needed it on the contractors letterhead, and we had to have a letter with starting and finishing date. Got what they asked for again from the contractor.We asked if we could fax it to them, they told us no. They said that it had already been shipped back to us. Our deadline was feb 10th.
We called on the 6th, and said we hadn't received the application and estimate, and asked what they wanted. We were told we had to exhaust all options before we could take a hardship and that if we took the minimum $1000 loan on our 401k that that would help us in getting the hardship withdrawal. She said it's only $5 a week from your paycheck. Like that's no big deal, but hey $5 is $5 when you have a family of 4.
So we took the stupid loan, she said she would express the check, and a new application because she couldn't find the old one. Well, needless to say we got the check the following day and we never received the application. We called (8th) and she said it was shipped, so she tried to track it and it said "billing info received", and then "billing info voided". So we called UPS, they said that whomever was shipping it cancelled it out. If we would have received it we would have made the deadline.
We have called and talked to 3 different people and no one can tell us what they want from us, and what we need to do. They get out a manual and start reading from there. We asked if we could take all our money out then, and we were told "You don't want to do that, You don't want to do that."
What I need to know is, how can we get our money and do they have any right to keep it? And do any of you have any idea what the heck they are looking for. We are talking about 5k, that is cheap to have a roof redone, and drainage dug. I don't get it. Other people at dh's work have taken it our for lesser things like posting bail. What are we doing wrong?
We would prefer to take just the 5k, but are willing to take it all and re-invest everything but the 5k into a different account, that if for some reason we needed 1 or 2 grand we could take it. I will never, ever, ever put into a 401k again. This is the 1st and only time we have tried to take out a hardship, and we will be set in later years with retirement without this 55k.
So is there anyway to get the money, or to withdrawal it all even though dh is still working for now. I know we can take the money when he loses his job, and we could take some later for tuition cost when I start school (which I don't plan on doing), but the roof is leaking now. It can't wait 6 more months. Any ideas?
Thanks in advance.~Buffie [/color]
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Wed Feb 15, 2006 6:52 am |
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Jaszbo
Preferred Member
Cash: $ 35.90
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Joined: 03 Jan 2006
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please reconsider what you are saying about 401k plans, becuase you've had a bad experience. How will you retire? I would say it's more foolish for you to count on social security and a pension than anything else, if you get both it's a bonus, if you count on them it's foolish and even at that it's most likely going to be enough. When you are in your late 60's and probably even 70's do you want to work?
I remember when I was 16 years old working with an old man at a local hardware store who was in his late 70's. He was verbally abused by our boss constantly and the guy took it, becuase he was living off of social security only, which wasn't even enough back then. Is this a situation you want or do you want more financial freedom? Don't let a bad experience ruin your future. An Engineer I know very well my entire also was never really good with money and decided to buy a house when the market was so hot and bought it at it's peak, he had to change jobs, had trouble selling the house and lost a lot of money. What did he do? For the past 20 years he's been renting and finally he woke up and bought a house. Guess what he's 58 years old and could barely afford the house, so he went with an intrest only loan and he's barely making the payments. He could have completely owned the house years ago and bought it for a fourth of the price. He got "screwed" one time in real estate and thought he would just rent, learned 20 years later that it's almost impossible to retire if you are renting, so he changed his mind, but he's probably 5 years from retiring and living paycheck to paycheck.
If you are not going to contribute to a 401k plan, how are you going to retire? You might be making the single biggest mistake possible. I think one big mistake already is that you guys haven't contributed enough, but to stay you are done with 401k plans I think is not wise, especially if you need to borrow 55k, it says that you do not have a lot of liquid assets for your disposal.
Here's a link for you about hardships for a 401k plan
http://www.401khelpcenter.com/hardships.html
From reading that if I was the company handling your 401k plan I wouldn't be certain it was one of those things either.
Here's another link for you
http://www.401khelpcenter.com/mpower/feature_121902.html
When they tell you that you don't want to withdraw or borrow from your 401k plan, they are actually right. I wouldn't advise anybody. A few days ago I read an article by Suze Orman, which I've read her say this over 2 million times. Instead of me trying to write about reasons not to do this, let me just copy and paste what her article says:
Don't borrow from your 401(k) or 403(b)
It's a horrible deal. For starters, your 401(k) contributions are pre-tax. Your money will get taxed later on, when you withdraw the money from the plan.
But if you take out a loan, you're pulling out pre-tax dollars that you will then have to repay -- with money that has already been taxed. Then when you eventually retire and start making withdrawals, the money is going to be taxed again. So your loan gets taxed twice.
The payback period can also be a problem. You'll have to repay the entire loan in just a few months if you're laid off or take a new job. And if you don't have the money for repayment -- and you're not 55 or older -- the loan will then be treated as a withdrawal. That means a 10 percent early withdrawal penalty and income tax on all the money. Ouch.
Moreover, you're shortchanging your retirement savings. Reducing the money you have growing tax-deferred in a retirement plan is going to translate into having less money when you need it.
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I would honestly look at other alternatives to borrow the money. Did you have 3 to 6 months of expenses emergency money? I'm assuming you didn't and maybe this can be a lesson as to one of the many reasons everybody needs 3-6 months of expense. I had to replace my entire roof a year ago in state that is one of the most expensive states and I can tell you that if the average salary family would have saved 6 months of salary that it would pay for most roofs.
Did you contact your insurance company? I'm not sure why you don't go through your insurance company to pay for the roof also?
Personally I'm a fan of the Roth IRA and you could withdraw from it without questions asked as long as it's your contributions, so if you really hate hate hate 401k plans then go with the Roth IRA, but you need a retirement plan and I would suggest both a Roth IRA and a 401k plan.
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Wed Feb 15, 2006 1:42 pm |
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